Hedging the dollar: what moves EUR/USD, what a forward costs and the pitfalls to avoid
The dollar is on the other side of nearly nine FX trades in ten worldwide. For a French company, it is the most common exposure and the easiest to hedge. What moves EUR/USD, what a forward costs today, the actual range over five years and the pitfalls specific to the dollar.
According to the Bank for International Settlements' Triennial Survey, the dollar was on one side of 89% of FX trades worldwide in April 2025, and the euro of 28.9%. EUR/USD is the most liquid pair there is: spreads are the tightest, and every hedging product is available. Good news for a company that hedges — provided it knows what it is paying.
What moves EUR/USD
- The gap between the monetary policies of the Federal Reserve, whose mandate combines maximum employment and price stability, and the ECB, which targets 2% inflation over the medium term.
- Expectations about that gap: the market reacts to anticipated decisions as much as to decisions taken.
- The relative economic situation of the two areas, and periods of stress when investors seek dollar assets.
None of these factors allows the rate to be forecast reliably — that is the subject of another Observatory article. They do explain why EUR/USD moves a lot, even when it seems calm.
The actual range over five years
On a one-million-dollar invoice, that gap is worth about EUR 210,000: EUR 1,045,500 at the low, EUR 835,100 at the high. That is the order of magnitude of the risk a hedge neutralises.
What a forward costs today
The forward rate does not depend on a forecast but on the interest-rate differential between the two currencies. With dollar rates above euro rates, the EUR/USD forward trades above spot.
| As of 16 October 2026 | Value |
|---|---|
| Gap between one-year forward and spot, EUR/USD | +1.56% (1.1239 spot, 1.1414 one year) |
| Exporter: EUR 1,000,000 receivable in USD, hedged one year ahead | about EUR 984,700, i.e. 1.5% less than at spot |
| Who the forward favours | The importer, who buys dollars forward at a better rate than spot |
For an exporter, this forward discount is the price of certainty: about 1.5% a year at current rates. For an importer, it is the reverse: the forward gives more dollars than spot.
Products available
Forwards, FX swaps, options and structures are all available on EUR/USD, with the deepest liquidity in the market. Implied volatilities measured on public EUR/USD option trades on 16 October 2026 stood around 6.3% a year for maturities of two to seven months — a level that makes options more affordable than on more volatile currencies.
Pitfalls specific to the dollar
- 1"Zero-premium" structures abound
EUR/USD is where banks offer the most collars, barrier forwards and accumulators. Their price is the hardest to check without a tool.
- 2The hidden dollar
An Asian supplier or a non-eurozone customer invoicing in dollars creates a dollar exposure, even when the deal has nothing American about it.
- 3A budget rate set at spot
With a 25% range over five years, a budget rate set at today's rate will be broken one day in two. It must allow for the range and the cost of the forward.
Sources
- Bank for International Settlements, 2025 Triennial Survey: "Global FX trading hits $9.6 trillion per day in April 2025", press release, 30 September 2025.
- European Central Bank, euro reference exchange rates (EXR series), from 15 October 2021 to 16 October 2026; extremes calculated by ELEGG.
- Forward points and spot rates captured by ELEGG Finance on 16 October 2026 at 22:17 UTC (source: NetDania), mid rates between bid and offer; ELEGG calculation.
- Implied volatilities: public FX option trades reported to DTCC (CFTC Part 43 dissemination) on 16 October 2026, premiums inverted by ELEGG with the Garman-Kohlhagen model; average of 58 near-the-money options.
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Frequently asked questions
The questions finance departments ask most often on this topic
How much does a dollar forward hedge cost?
The cost depends on the interest-rate gap between the euro and the dollar. On 16 October 2026, the one-year EUR/USD forward traded about 1.56% above spot: an exporter selling dollars forward receives about 1.5% fewer euros than at spot, while an importer receives more dollars.
How much has EUR/USD moved in recent years?
According to ECB reference rates, EUR/USD went from a low of 0.9565 on 28 September 2022 to a high of 1.1974 on 28 January 2026, a 25% gap. On a one-million-dollar invoice, that is worth about EUR 210,000.
Is the dollar easy to hedge?
It is the most liquid currency in the world: the dollar is on one side of 89% of FX trades according to the BIS. Every hedging product is available and spreads are the tightest in the market.
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